United States District Court, D. New Hampshire
M. Butcher, Esq.
Reed Fennessy, Esq.
Stephen T. Martin, Esq.
McCafferty United States District Judge
case, which has been removed from the Merrimack County
Superior Court, consists of five claims asserted by Susan
Heino in response to defendant's attempt to foreclose on
a mortgage Heino gave to defendant's predecessor in
interest, Washington Mutual Bank (“WaMu”). Before
the court is defendant's motion for summary judgment.
Plaintiff objects. The court heard oral argument on
defendant's motion on July 26, 2016.
movant is entitled to summary judgment if it “shows
that there is no genuine dispute as to any material fact and
[that it] is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a). In reviewing the record, the court
construes all facts and reasonable inferences in the light
most favorable to the nonmovant. Kelley v. Corr. Med.
Servs., Inc., 707 F.3d 108, 115 (1st Cir. 2013).
otherwise indicated, the facts recited in this section are
undisputed at this early juncture.
early 2005, an employee of WaMu approached Heino,
unsolicited, and told her that WaMu could provide her with a
mortgage loan that had more favorable terms than the loan she
had at the time. However:
He did not identify the loan as a negative amortization loan,
and he did not explain the terms of the loan. Instead, he
represented that it would provide her a lower interest rate,
and that timely payments on the loan, would result in the
principal decreasing, when in fact, he knew that the
principal would not decrease. He also told her that her
interest rate would remain the same for one year, when in
fact, it would actually only remain the same for one month .
. . .
no. 1-1 ¶ 10. Based upon those representations, Heino
submitted a loan application to WaMu.
18, 2005, in exchange for a loan of $311, 000, Heino gave
WaMu an adjustable rate note. The following statements appear
on the top of the first page of Heino's note:
THIS NOTE CONTAINS PROVISIONS ALLOWING FOR CHANGES IN MY
INTEREST RATE AND MY MONTHLY PAYMENT. MY MONTHLY PAYMENT
INCREASES WILL HAVE LIMITS WHICH COULD RESULT IN THE
PRINCIPAL AMOUNT I MUST REPAY BEING LARGER THAN THE AMOUNT I
ORIGINALLY BORROWED . . . .
no. 5-4 at 2 of 9. Regarding changes in Heino's interest
rate, the note provides: “The interest rate I will pay
may further change on the 1st day of July, 2005, and on that
day every month thereafter.” Id. at 3 of 9.
Under the heading “Changes in My Unpaid Principal Due
to Negative Amortization or Accelerated Amortization, ”
the note provides:
Since my payment amount changes less frequently than the
interest rate and since the monthly payment is subject to the
payment limitations described in Section 4(F), my monthly
payment could be less or greater than the amount of the
interest portion of the monthly payment that would be
sufficient to repay the unpaid Principal I owe at the monthly
payment date in full on the maturity date in substantially
equal payments. For each month that the monthly payment is
less than the interest portion, the Note Holder will subtract
the monthly payment from the amount of the interest portion
and will ad[d] the difference to my unpaid Principal, and
interest will accrue on the amount of this difference at the
current interest rate.
Id. at 4 of 9.
secure her promise to repay the loan, Heino gave WaMu a
mortgage on her property in Contoocook, New Hampshire.
Paragraph 22 of the mortgage is titled “Acceleration;
Remedies.” That paragraph includes the following
Lender shall give notice to Borrower prior to acceleration
following Borrower's breach of any covenant or agreement
in this Security Instrument . . . . The notice shall specify:
(a) the default; (b) the action required to cure the default;
(c) a date, not less than 30 days from the date the notice is
given to Borrower, by which the default must be cured; and
(d) that failure to cure the default on or before the date
specified in the notice may result in acceleration of the
sums secured by this Security Instrument and sale of the
Property. The notice shall further inform Borrower of the
right to reinstate after acceleration and the right to bring
a court action to assert the non-existence of a default or
any other defense of Borrower to acceleration and sale. If
the default is not cured on or before the date specified in
the notice, Lender at its option may require immediate
payment in full of all sums secured by this Security
Instrument without further demand and may invoke the
STATUTORY POWER OF SALE and any other remedies permitted by
no. 5-5 at 16 of 23.
closing, Heino was not represented by counsel, but WaMu was.
The closing took less than an hour. WaMu's attorney did
not allow Heino to read any of the closing documents, and did
not explain any of the terms used in those documents to her.
As Heino said in her verified complaint:
[I] did not realize at the time that the loan [I] signed with
WAMU was an adjustable-rate, negative amortization note. In
other words [I did not understand that], despite making [my]
payments timely, the outstanding balance of the loan would
increase because the payments were less than the interest
no. 1-1 ¶ 13.
History of the Mortgage
original mortgagee was WaMu. However, “WaMu collapsed
on September 25, 2008.” Kim v. JPMorgan Chase Bank,
N.A., 825 N.W.2d 329, 330 (Mich. 2012). Upon WaMu's
the federal Office of Thrift Management closed the bank and
appointed the Federal Deposit Insurance Corporation (FDIC) as
receiver for its holdings. That same day [i.e., September 25,
2008], the FDIC, acting as WaMu's receiver, transferred
virtually all of WaMu's assets to [JPMorgan Chase Bank]
under authority set forth in the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989. Under 12
U.S.C. § 1821, the FDIC is empowered to transfer the
assets of a failed bank “without any approval,
assignment, or consent . . . .” However, in this case,
[the FDIC] did not avail itself of that authority. Instead,
the FDIC sold WaMu's assets to [JPMorgan Chase Bank]
pursuant to a purchase and assumption (P & A) agreement.
Id. at 330-31 (footnotes omitted). In October 2008,
JPMorgan Chase Bank, N.A. (“Chase”) informed
Heino that it was her new loan servicer. Doc. no. 1-1 ¶
February 2013, acting in its capacity as the receiver of
WaMu, the FDIC executed an assignment of Heino's mortgage
to Chase. That assignment was filed in the Merrimack County
Registry of Deeds, and it includes this language: “This
Assignment is intended to further memorialize the transfer
that occurred by operation of law on September 25, 2008 as
authorized by Section 11(d)(2)(G)(i)(II) of the Federal
Deposit Insurance Act, 12 U.S.C.
S1821(d)(2)(G)(i)(II).” Doc. no. 5-6 at 2 of 2. In
August 2015, Chase executed an assignment of Heino's
mortgage to the defendant, U.S. Bank Trust, N.A., as Trustee
for LSF9 Master Participation Trust (“U.S.
Heino's Payment History
month after her closing, Heino discovered that the interest
rate on her loan had increased. She also discovered that her
principal balance would not necessarily decrease over time,
because the loan she received from WaMu was a negative
2009, at a point when she was current on her loan payments,
Heino asked Chase about obtaining a lower interest rate.
According to Heino:
Chase told [her] that if [she] wanted to modify the loan to
obtain a lower interest rate, then [she] would need to fall
behind on [her] payments. Per Chase's instructions, [she]
stopped making [her] payments. Once [she] was far enough in
default, [she] submitted a modification package to Chase.
Doc. no. 10-2 ¶ 11. In August 2009, Chase approved Heino
for a loan modification trial payment plan
(“TPP”) and told her that if she completed the
trial successfully, a permanent modification would be put in
place. Neither party has produced any written memorialization
of the TPP agreement. Heino made the payments required by the
TPP for September, October, November, and December 2009. For
January 2010, Chase told Heino to make a payment that was
even less than the reduced amount required by the TPP, and
she made the payment Chase told her to make.
February 2010, Chase stopped accepting Heino's payments
and refused to make her modification permanent. That same
month, Chase sent Heino a letter captioned “Notice of
Collection Activity.” It is undisputed that Chase's
notice included all the information required by paragraph 22
of the mortgage. Specifically, the notice told Heino that she
could cure her default by paying the total amount due stated
in the notice ($7, 597.21), plus any additional monthly
payments and late charges falling due within 30 days after
the date of the notice. She did not do so. However, while
Chase scheduled one or more foreclosure sales, it never
December 2010, Chase sent Heino a letter she characterizes as
“offering to allow her to sell [the mortgaged property]
for less than the total balance on the loan.” Doc. no.
10-2 ¶ 17. But rather than making such an offer, that
letter merely informed Heino that Chase was willing to talk
with her about the possibility of avoiding foreclosure by
conducting a short sale. See doc. no. 10-6 at 2 of 3.
the next several years, Chase sent Heino any number of
mortgage statements and other communications concerning her
loan. See doc. no. 10-4. Finally, in August 2015, after Chase
assigned Heino's mortgage to U.S. Bank, the new loan
servicer, Caliber Home ...